Hope for cotton farmers and textile mills

The textile industry and cotton farmers are faced with a unique opportunity to recover from years of poor performance, as a result of both the global meltdown and inappropriate policies of the past.

Cotton farmers can earn 25 per cent more if domestic mills buy their cotton at international prices, or the Cotton Corporation of India (CCI) is asked to intervene and buy at international prices, or by permitting exports. Spinners, who suffered as a result of exports of CCI-subsidised cotton, can now bounce back and export surplus yarn.

SURPLUS SPINNING CAPACITY

Spinning capacity is expanding rapidly and yarn production is far in excess of what can be consumed by the domestic knitting and weaving industry. An even bigger surplus will become available for exports in the days to come. Consumption of yarn by the domestic industry is increasing only gradually.

The processing sector, which by its own admission has not been compliant for decades and has caused irreparable damage to agricultural activity over thousands of acres, has been forced into closure by a court order, and will take a long time to come back to full production. The consumption of yarn by the weaving sector, despite the doubling of weaving charges, is tardy, as the economics of new investments in weaving will depend on the continuance of the Textiles Upgradation Fund scheme even at today's levels of weaving conversion costs.

POWERLOOM CRISIS

Powerloom weaving, the backbone of Indian cloth manufacturing, is facing a serious labour shortage, as it will become unviable at higher wages. It is becoming increasingly difficult for the sector to attract workers to man all shifts at economically viable salaries; this is in spite of increased weaving costs.  

Yarn consumption in this sector is hardly growing. Processing capacity is actually declining , thanks to the activism of NGOs backed by agriculturists who foresee a lost opportunity as agriculture prices move north. The process of de-growth will continue until we come out with shore-based processing parks. Garmenting capacities will, therefore, find themselves limited by non-availability of processed fabrics and domestic garmenting units will pose a serious threat to exporters and eat into their capacities.

POLICY REMEDIES

We need to get realistic, by adopting the following measures.

First we need to allow yarn exports , help mills reduce their stocks and utilise installed capacities fully.

Today, with no market for yarn at cost plus prices, mills are keeping the units idle during peak hours and during power outage periods, instead of buying costly power or generating power using diesel.

Once mills get positive cash flow and remunerative prices, they will operate to full capacity and buy cotton. Cotton prices will rise closer to international prices. If that does not happen, we should allow cotton exports.

The way to reduce the domestic textile prices is by removing the customs duties on intermediates in polyester production and polyester fibre. This will ease textile product inflation, even as we allow farmers the freedom to price their produce at international prices.

We should not deprive poor cotton farmers of an opportunity to make some money, nor should we allow expensive capacities created in the spinning mills to go unutilised.

By addressing the concerns of farmers and spinning mills, we would be helping the consumer.

(The author is Chairman and Managing Director, Loyal Textiles.)

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